Question

In response to complaints about high prices, a grocery chain runs the following advertising campaign: “If you pay your child $1 to go buy $31 worth of groceries, then your child makes about twice as much on the trip as we do.” You’ve collected the following information from the grocery chain’s financial statements: (millions) Sales $ 772.00 Net income 12.35 Total assets 365.00 Total debt 157.00

What is the child’s profit margin? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What is the store’s profit margin? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

  
What is the store's ROE? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

	Given Information	Amt in Million
	Sales	$                          772.00
	Net Income	$                             12.35
	Total Assets	$                          365.00
	Total Debts	$                          157.00
	Child Profit Margin=Net Income/Sales
	Net Income	$                               1.00
	Sales	$                             31.00
	Child Profit Margin=($1/$31)	3.23%
	Store Profit Margin=Net Income/Sales
	Net Income	$                             12.35
	Sales	$                          772.00
	Store Profit Margin=($12.35/772)	1.60%
	ROE=Net Income/Total Equity
	Total Equity=Total Assets-Total Debt
	Net Income=	$                             12.35
	Total Equity=($365-$157)	$                          208.00
	ROE=($12.35/$208)	5.94%